Bitcoin: Trading Interest Is at an All-Time High. Is BTC Likely to Follow Suit?
Financial Analyst
- An increase in open interest is positive for the price of the cryptocurrency
- However, activity on the Bitcoin network has dropped significantly in recent days
The recent drop in the price of Bitcoin [BTC] contributed to a correction in most tokens. This, in turn, also led to a general decline in market sentiment.
However, despite the falling price of the cryptocurrency, the overall open interest in Bitcoin increased sharply. This can be interpreted as a sign that traders are increasingly interested in the king coin. One of the reasons for this could be that these traders now expect significant price fluctuations in the future.
Open interest increases
Another positive aspect of open interest in BTC is that it is an indication of institutional interest in Bitcoin trading. This could lead to higher liquidity in the cryptocurrency’s futures market.
Source: Coinglass
According to Coinglass’ data, short positions in BTC also increased sharply, outpacing long positions. If there is indeed a significant price drop, it may trigger a cascade of short covering. This happens when short sellers are forced to buy back Bitcoin to close their positions, which can drive the price further down in a self-fulfilling prophecy.
However, the high number of short sellers also creates the possibility of a short squeeze. When the price of Bitcoin rises unexpectedly, short sellers face mounting losses and are pressured to buy back Bitcoin to limit the damage. This buying spree can actually accelerate the price increase in a dramatic reversal.
Source: coinglass
The US government’s holdings could also affect the Bitcoin price on the charts. Every time the US government has sold its holdings, the price of BTC has been negatively affected.
Currently, the US government holds 213,039 BTCs – approximately $13.10 billion.
News of a potential government sale can create fear among investors, especially given previous cases where government sales have coincided with price declines. This fear can lead to a sell-off and push the price further down.
Source: TheBlock
Activity on the network
As for the state of the network, the number of daily active addresses on the Bitcoin network has increased significantly in the last few days, indicating a massive drop in interest in its ecosystem.
This declining interest in the Bitcoin network can also have a negative impact on the price.
Read the [BTC] Bitcoin price prediction 2024-25
Source: Santiment
